[OPE-L:2495] Re: Re: Re: Re: Re: Re: The employment contract

From: Ernesto Screpanti (screpanti@unisi.it)
Date: Wed Mar 08 2000 - 06:45:03 EST

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Gil wrote in [2479]

At 19.07 03/03/00 -0500, you wrote:
>In response to these passages from me,
>>>So far as I know Marx never asserts as a matter of *definition* that the
>>>phenomenon he labels "capitalist exploitation" must arise from a
>>>*production relationship* between capitalists and workers. He does,
>>>repeatedly and without ever reversing himself (more about the textual basis
>>>for this claim below), identify historical circuits of capital which
>>>involved no such production relationship (i.e., circuits other than that of
>>>industrial capital) and yet involved capitalist exploitation. Thus, the
>>>characterization you give, Ernesto, could be the historically contingent
>>>consequence of given class conditions rather than a matter of definition.
>>>The foregoing reading, if valid, suggests a broader interpretation of
>>>"capitalist exploitation" as the appropriation of surplus value by
>>>non-producers of that value via some circuit of capital.
>>>What Marx does insist is that surplus value, and thus capitalist
>>>exploitation, must involve the production of new value (that is, value
>>>creation arising within a circuit of capital) rather than the mere
>>>redistribution of pre-existing value. But that's why I focused
>>>specifically on the cases of usury and merchant capital extended to value
>>>producers, rather than to "extravagant magnates" (to quote from Ch. 36 in
>>>Vol. III of Capital) and other non-value producers. In these cases, the
>>>circuit of capital provides the wherewithal for value producers to create
>>>new value, as required, part of which is appropriated by the capitalist in
>>>the form of interest or merchant profit (as in the putting-out system and
>>>other proto-industrial forms).
>>>This vision is evidently what Marx has in mind, for example, in this
>>>passage from the Resultate (with parallel passages in Capital V. III,
>>>Grundrisse, and the Ec. Manuscript of 1861-63):
>>>"In India, for example, the capital of the usurer advances raw materials or
>>>tools or even both to the immediate producer in the form of money. The
>>>exorbitant interest which it attracts, the interest which, irrespective of
>>>its magnitude, it extorts from the primary producer, is just another name
>>>for surplus-value. It transforms its money into capital by extorting
>>>unpaid labour, surplus labour, from the immediate producer. But it does
>>>not intervene in the process of production itself...here we have *not yet*
>>>reached the stage of the formal subsumption of labour under capital."
>>>[Appendix to Penguin Classic edition of Capital V. I, p. 1023]
>>>I would say the key point for this part of the discussion is that Marx
>>>nowhere excludes *by definition* the possibility of capitalist exploitation
>>>without capitalist production relations, and thus, the capitalist
>>>employment contract.
>, Ernesto writes:
>>My understanding of Marx is that *Appropriation* of surplus value in the
>>circulation process (e.g. by monetary capitalists) presupposes that surplus
>>value has been produced. It can only be produced in the production process,
>>not in the circulation process.
>Two points: first, value added does not become "surplus value" *until* it
>has been appropriated by capitalists via some circuit of capital. Marx
>makes this point in V. I, Chapter 5 (p. 268 in Vintage and Penguin
>editions) when he says that surplus value isn't created simply by a worker
>transforming raw materials into a finished product. Thus the suggestion
>that appropriation of surplus value "presupposes that surplus value has
>been produced" can have no meaning in Marx's framework. *New value* is
>produced, perhaps via the wherewithal provided by usury or merchant
>capital. It doesn't become *surplus value* **until** some non-producer
>appropriates it via some circuit of capital.

For a surplus value to exist, there must be a surplus product. This can
only come from production. You are right if you mean that a surplus product
becomes surplus value when values are determined. If this determination
requires the fixing of money prices, then the monetary circuit and the
circulation process are necessary to the definition of value and therefore
of surplus value.
>Second, I certainly agree that surplus value must *originate* in
>production; that was my point in the passages reproduced above. But note
>critically that this stipulation does not require that *capitalists*
>control the production process. So if, as in Marx's India example cited
>above, a usury capitalist provides the financing for the creation of new
>value and then appropriates a portion of that newly created value in the
>form of interest, that constitutes surplus value and consequently
>capitalist exploitation.

If surplus product is produced in the labour process, somebody must control
production. If it is capitalist production, I call "capitalist" the
controller. (yea, a definition!) He might be the owner of capital, or a
"working capitalist" (Marx) who does not own a share. Of course money
capital must be advanced by somebody to buy or rent the means of
production. But the owners of money capital or fictitious capital, though
are entitled to a part of surplus value in the form of interest, are not -
"as pure owners of capital" and as separate figures with respect to the
"working capitalist" - the subjects who control production and the
extraction of surplus value.

>A thought experiment may illustrate this point. Suppose that under the
>historical conditions underlying Marx's India example, capitalists had for
>some reason decided to run the production process (using the identical
>technology and means of production) directly and as a result extracted the
>same value equivalent as profit that was embodied in the interest paid to
>the capitalist as usurer. By construction the conditions of production and
>value distribution are *exactly the same*; it's just that in one case the
>capitalist oversees the production process. By Ernesto's reading, if I
>understand it, the value appropriated by the capitalist constitutes surplus
>value, and thus capitalist exploitation, in the hypothetical case but not
>in the historical one. Why?

In your example the owner of capital is also the working capitalist. Note
that he will then earn an income that is the summation of an interest on
capital and a "wage of superintendance" (i.e. the profit net of interest
payments). If you agree on this, I agree with your above comment.

>Concerning the following passage I quoted from Capital V. III, concerning
>the efficacy of usury (or merchant) capital as vehicles for capitalist
>exploitation subsequent to the advent of the capitalist mode of production,
>>>>>"If an inappropriately large number of capitalists sought to transform
>>>>>their capital into money capital, the result would
>>>>>be a tremendous devaluation of money capital and a tremendous fall in the
>>>>>rate of interest; many people would immediately find themselves in the
>>>>>position of being unable to live on their interest and thus compelled to
>>>>>turn themselves back into industrial capitalists." [Capital V. III, p.
>Ernesto writes:
>>Interest bearing capital is wider than money capital. It includes for
>>instance fictitious capital. The passage you quoted clearly refers to a
>>process of reduction in real capital investement and increase in liquid
>I must say I don't see this. To me the key phrase indicating Marx's
>intended sense in this paragraph is that referring to the "still greater
>nonsense....that the capitalist mode of production could proceed on its
>course without capitalist production", after which the passage I originally
>cited follows. But ultimately, our different interpretations of this
>passage aren't the key point, in light of the following.
>In response to this comment of mine,
>>>.... first, it suggests that for Marx the connection between
>>>capitalist production relations and capitalist exploitation is contingent
>>>rather than categorical;
>, Ernesto writes
>>In my view the connection between capitalist production relations and
>>capitalist exploitation is a fundamental category of Marx's analysis. It is
>>a basic tenet of his general and abstract model of capitalism. At lower
>>levels of analysis contingencies are introduced. May be we disagree because
>>we are voyaging at two different levels of analysis.
>Yes, it could be. That depends on what you mean by "fundamental category"
>and "basic tenet." I certainly agree with you that the subsumption of
>labor under capital is descriptively characteristic of the process of
>capitalist exploitation in modern capitalism. But that leaves open the
>question of whether a) capitalist exploitation depends on capitalist
>production as a matter of *definition*, or b) the dependence is due to
>class conditions which define, or at least universally characterize, the
>capitalist mode of production. I think the answer to (a), at least
>according to Marx, is clearly no: Marx nowhere *defines* capitalist
>exploitation as requiring capitalist production. If I'm right that reduces
>the issue to (b). In this reading "fundamental category" and "basic tenet"
>mean, in effect, that the existence of capitalist exploitation *implies* or
>*necessitates* capitalist control of production.


>Thus Ernesto responds to the following comment of mine
>>>second, and moreover, that surplus value and thus
>>>capitalist exploitation would perhaps decline in magnitude but not
>>>necessarily disappear even if capitalists could not subsume labor in the
>>>formal or real sense.
>by saying
>>Sorry, I thoroughly disagree with this. There can be no capitalist
>>exploitation without the despotism of capitalism in the production process.
>There's nothing wrong with disagreement, of course, but I'm curious:
>what's the basis for this categorical assessment? Is it in Marx's writing?
> If so, where? And if not, what's the underlying logic?

Altough we are discussing Marx's theory, I do not want to enter a debate
on "what Marx really meant"; and this for a simple reason: that there is no
reading which is not an interpretation. So, please do not ask me to endorse
my interpretation with quotations. At any rate, in the chapter on
"Co-operation" of Capital, I, you can find plenty of quotations on the
despotism of capital in the labour process.

>In this
>connection, for what it's worth, I note that mainstream "principal-agent"
>(incentive) theory does not support such a categorical assessment,
>suggesting instead that the impact on profitability of the sort of
>contractual difficulties Ernesto has been discussing is a matter of degree
>rather than kind. Insofar as Marxian thinking at least does not *rule out*
>the sort of rationality and optimization conditions assumed in that
>literature, it is of relevance to this issue.

The principal-agent model seems to me an ideology based on a confusion
between the agency relation (whereby the agent receives a mandate to choose
freely the best means to pursue the principal's goals; for instance you are
the principal, your dentist is you agent) and the employment contract
(whereby the employee takes an obligation to obey the employer in the
labour process, within institutionally determined authority boundaries;
your dentist is not your employee; your secretary is). This confusion is
the reason why mainstream principal-agent theory does not support that
categorical assessment of mine: it does not understand the necessity of
power as a condition for exploitation.

>In addition, the historical record does not clearly support a categorical
>assessment re the connection between capitalist exploitation and capitalist
>control of production. Historian Maxine Berg (a former student of OPE-Lmate
>Mike Lebowitz, by the way), for example, writes concerning the persistence
>of the putting-out system and other proto-industrial forms in the
>capitalist era:
>"The [capitalist] factory...was but one form of work organization among
>several, including the putting-out system, small workshops and artisan
>production...[that] reveal the existence of alternative forms which could
>be exploited just as effectively as the factory and the machine to raise
>capitalist profit and control. [ Berg, _The Age of Manufactures 1700-1820_,
>pp 195-96]

Nobody pretends that a social system can ever be pure. Let me refer to
Hodgson's "impurity principle". A capitalist "mode of production" is a
model or ideal type that defines capitalism in its pure form, i. e. by
focusing analysis on only the fundamental characteristics of capitalism. In
actual, hystorical capitalism, the fundamental characteristics are alwyas
mixed up with spurious institutions and organizational forms. Even slavery
is still used in some advanced capitalism countries (for instance in the
exploitation of childrens and prostitutes). Also the putting out system is
still used (for instance by Benetton!). Let me insist in trying to separate
historical contingencies from theoretical models.

>Bottom line: unless one *defines* capitalist exploitation as requiring
>capitalist production (which, as indicated above, I don't think Marx did),
>I don't see the basis for asserting a *categorical* link between the two.
>I think I'll save a discussion of the employment relation as a power
>relation for later. But there I think it's much more likely that Ernesto
>and I are simply using terms ("authority" vs. "power") differently.
It seems to me that our tatonnement is slowly converging to a walrasian
equilibrium of ideas (and interpretations?). If so: "Frenchmen, another
effort, if you want to be republicans" (Sade).
In solidarity,

Ernesto Screpanti
Dipartimento di Economia Politica
Piazza S. Francesco 1
53100 Siena
tel: 0577 232784
fax: 0577 232661

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